Commercial property availability in lull at mid-year after steep rise in late 2008

Monday, July 20, 2009, 1:44 pm

By Jeff Quackenbush, Business Journal Staff Reporter

Many of the North Bay commercial real estate markets showed little change in the amount of available space on market in the second quarter compared with the first quarter, according to newly released brokerage figures.

And that’s a good thing, considering the rapid slowdown in business activity, especially among retailers, that led to a surge in store closings and layoffs in the fourth quarter of last year and the first quarter of this year.

The retail vacancy rate in Sonoma County, which soared from 4.2 percent this time last year to 8.6 percent at the end of 2008, increased barely to 8.8 percent at the mid-year point of 2009, according to Keegan & Coppin/Oncor International.

The brokerage estimated the county office vacancy rate was 21.7 percent at the end of the second quarter of this year, compared to 21.8 percent in the first quarter and 20.2 percent a year ago. NAI BT Commercial figured a 29.7 percent rate for the county in mid-2009, compared with 29.2 percent in the first quarter and 24.8 percent a year ago.

The industrial-space markets of Sonoma and Napa counties had the largest proportionate changes from the first to the second quarters of this year. Though the vacancy rate for Petaluma was lower in mid-2009 than at the end of the first quarter and of 2008 in Petaluma, the countywide rate increased to 14.4 percent from 13.9 percent in the first quarter and 11.4 percent a year ago. NAI BT figured vacancy for the 17.3 million-square-foot Sonoma County industrial market to be 13.5 percent, compared with 13.2 percent earlier this year and 9.7 percent in mid-2008.

Brian Foster of NAI BT noted the rapid slowdown in deal-making in the Petaluma industrial and warehouse market, from 25 leases and eight sales in 2007 to 24 leases and five sales in 2008 and only two leases and no sales this year until Thermo Fisher inked a lease for 90,000 square feet of consolidation space in Petaluma recently.

The situation has been similar in Marin County, noting that leasing of industrial space smaller than 5,000 has been particularly slow, according to Mr. Foster. There was only one lease of that size for the first half of this year in Marin, compared with 19 in the first half of last year and 21 in that part of 2007.

“The amount of square feet leased is also on pace to fall dramatically for the second consecutive year,” he said.

Commercial real estate market estimates

Keegan & Coppin	2nd qtr. ’08	1st qtr. ’09	2nd qtr. ’09
Sonoma Co. office vacancy (%) and net absorption (s.f. ’08-’09, ’07-’08)
Petaluma	34.6%	36.4%	35.7%
	26,735	-276,197	-66,306
Rohnert Park	25.5%	27.3%	25.9%
	-36,876	-38,405	-12,965
Santa Rosa	14.4%	15.9%	16.6%
	-155,259	-88,095	-144,516
Airport, Windsor, Healdsburg	14.6%	14.8%	14.7%
	-31,023	-45,455	-3,216
Total	20.2%	21.8%	21.7%
	-196,423	-448,152	-227,003
Sonoma Co. industrial vacancy (%) and net absorption (s.f. ’08-’09, ’07-’08)
Petaluma	17.0%	15.3%	13.9%
	-40,673	112,895	161,119
Rohnert Park	9.0%	11.0%	13.5%
	-481,085	-77,916	-167,910
Santa Rosa	12.5%	15.3%	16.0%
	-196,666	-499,664	-358,858
Airport, Windsor, Healdsburg	5.1%	11.7%	12.3%
	76,149	-486,871	-411,186
Total	11.4%	13.9%	14.4%
	-642,275	-951,556	-776,835
Sonoma Co. retail vacancy
Cloverdale	8.2%	13.5%	13.5%
Healdsburg	5.4%	5.5%	5.6%
Petaluma	3.2%	10.5%	10.2%
Rohnert Park/Cotati	8.0%	9.5%	10.0%
Santa Rosa	3.4%	9.2%	9.4%
Sebastopol	2.8%	2.8%	2.8%
Sonoma	1.4%	2.5%	3.9%
Windsor	2.0%	7.8%	7.3%
Total	4.2%	8.6%	8.8%
Marin Co. office vacancy (%) and net absorption (s.f. ’08-’09, ’07-’08)
Sausalito	10.5%	18.8%	-
	10,312	-4,633	-
Tiburon*	0.0%	28.7%	-
	1,311	-3,876	-
Mill Valley	12.7%	14.7%	-
	4,381	-8,381	-
Corte Madera	3.3%	6.9%	-
	4,508	-10,852	-
Larkspur/Greenbrae	10.9%	19.8%	-
	-30,265	-16,510	-
San Rafael	18.7%	26.6%	-
	27,911	-203,298	-
Novato	15.1%	17.0%	-
	67,141	-5,169	-
Total	15.1%	20.8%	-
	85,299	-252,719
Marin Co. industrial vacancy (%) and net absorption (s.f. ’08-’09, ’07-’08)
Sausalito	2.5%	4.7%	-
	-11,189	-16,237	-
Mill Valley	0.0%	0.0%	-
	0	0	-
Corte Madera	0.8%	0.6%	-
	-872	11,668	-
Bahia de Rafael	1.6%	0.4%	-
	28,947	-1,500	-
San Rafael	2.6%	4.6%	-
	336	-78,330	-
Novato	1.9%	2.7%	-
	39,947	23,221	-
Total	2.2%	3.3%	-
	57,169	-61,178	-
Marin Co. retail vacancy
Sausalito	5.5%	4.0%	-
Mill Valley	1.4%	3.6%	-
Corte Madera	4.1%	2.7%	-
Larkspur/Greenbrae	2.7%	2.6%	-
San Anselmo	0.7%	2.3%	-
San Rafael	2.3%	3.5%	-
Novato	8.0%	9.1%	-
Total	4.2%	4.8%	-
Napa Co.
Office vacancy
Napa Co. Airport-area business parks	10.3%	14.3%	14.1%
Industrial vacancy
Napa Co. Airport-area business parks	4.4%	10.1%	11.7%

Notes: Keegan & Coppin didn’t have second-quarter 2009 figures for Marin County available. The Tiburon office market has 17,000 square feet.

NAI BT Commercial	2nd qtr. ’08	1st qtr. ’09	2nd qtr. ’09
Sonoma Co. office vacancy
Class A	30.5%	34.9%	35.4%
Class B	16.9%	19.1%	19.4%
All types	24.8%	29.2%	29.7%
Absorption (s.f.)
Gross	143,154	160,104	44,298
Net	-76,348	-181,199	-10,212
Average asking rent (full-service basis, per s.f. per month)
Class A	$1.89	$1.87	$1.84
Class B	$1.81	$1.65	$1.61
All types	$1.87	$1.79	$1.75
Sonoma Co. industrial vacancy
All types	9.7%	13.2%	13.5%
Absorption (s.f.)
Gross	137,560	169,554	138,917
Net	-137,577	-325,460	-51,132
Average asking rent (full-service basis, per s.f. per month)
All types
Marin Co. office vacancy
Class A	15.6%	23.4%	24.0%
Class B	12.3%	15.8%	16.2%
All types	13.2%	18.4%	18.8%
Absorption (s.f.)
Gross	238,981	43,435	75,327
Net	14,933	-240,698	-41,657
Average asking rent (full-service basis, per s.f. per month)
Class A	$2.86	$2.55	$2.55
Class B	$2.76	$2.65	$2.62
All types	$2.80	$2.59	$2.58